Are Training Subsidies for Firms Effective? The Michigan Experience

Abstract

This paper explores the effects of a state-financed training grant program for manufacturing firms in Michigan. Using a three-year panel of data from a unique survey of firms that applied for these grants, the authors estimate the effects of receipt of a grant on total hours of training in the firm and the product scrap rate. They find that receipt of these grants is associated with a large and significant, though one-time, increase in training hours, and with a more lasting reduction in scrap rates.